__________ Occurs When Decision Makers Incorrectly Fixate on Past Expenditures

question 41

Multiple Choice

__________ occurs when decision makers incorrectly fixate on past expenditures of time, money, or effort in assessing choices rather than focusing on future consequences.

• A) hindsight bias
• B) confirmation bias
• C) overconfidence bias
• D) sunk costs error
• E) self-serving bias

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Definitions:

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio.

Idiosyncratic Risk

The risk associated with an individual asset, which can be mitigated through diversification.

Systematic Risk

Systematic risk refers to the inherent risk that affects the entire market or a major market segment and cannot easily be mitigated through diversification.

Diversifiable Risk

A type of investment risk that can be reduced or eliminated through diversification of an investment portfolio.